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India needs to grow by 8% amid geopolitical uncertainties, finance ministry says
The 50 percent tariff could shave growth by up to 40 basis points in 2025-26.
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Reuters - Tue, 19, Aug 2025
- 09:49 EDT
- 12
FILE PHOTO: A worker works on a rail component inside a manufacturing unit of Titagarh Rail Systems Ltd. (TRSL) in Uttarpara, India, June 18, 2025. / REUTERS/Sahiba Chawdhary/File Photo
India's economy needs to expand by about 8 percent annually over the next decade amid rising geopolitical uncertainties, the federal finance ministry told a panel of lawmakers, with the government expecting domestic demand and investments to drive the growth.
Government estimates peg India's growth at 6.3 percent-6.8 percent for the financial year through March 31, broadly in line with last year's 6.5 percent growth and much below the 9.2 percent clocked in 2023-24
The ministry's comments align with the government's goal of making India a developed economy by 2047, a target that economists have said requires growth of 8 percent-9 percent every year.
Also Read: S&P lifts India's rating to BBB in first upgrade since 2007
"Ideally, the Indian economy will need to grow by around 8 percent in real terms every year, at least for a decade," the finance ministry said in its reply to a parliamentary committee in June, according to a report released on Aug. 19.
To achieve that target, India would also have to lift its investment rate to about 35 percent of GDP from about 31 percent currently, the ministry said.
Amid an uncertain trade backdrop, including a 50 percent U.S. tariff on Indian goods, New Delhi is trying to spur domestic demand through planned consumer tax cuts, following personal tax reductions in February, while the central bank has cut rates by 100 basis points this year.
The 50 percent tariff could shave growth by up to 40 basis points in 2025-26.
The finance ministry made these comments before the U.S. set a 25 percent tariff on Indian goods and imposed an additional 25 percent tariff for buying Russian oil.
Trade talks between India and the United States collapsed earlier this month as New Delhi did not agree to give Washington access to its vast agriculture and dairy markets.
India is prioritising enhanced opportunities for its labour-intensive exports, including textiles, apparel and leather goods, the finance ministry said.
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